The ISM Told Us

I’ve often said that the monthly ISM index has been a pretty reliable indicator of when NBER dates recessions. This time around, the ISM was slow in telling us when the recession started but was pretty good on getting the end.

The subject of recession dating is quite literally academic — it depends on what you call a recession. Here’s NBER’s official statement on how it pinpoints a peak and trough in the economic cycle.

I’ve found that the tipping point on the ISM index is about 44.4. According to NBER, the recession began in December 2007 when the ISM was still around 50. It danced around 50 until the financial crisis of that September.

The ISM jumped from 43.2 in May 2009 to 45.3 in June to 49.1 in July. The index has been above 50 every month since August 2009.

Posted by Eddy Elfenbein on September 20th, 2010 at 11:54 am

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